RBI against an independent body, wants Guv as president with casting vote

The RBI also argued that the panel's position is different from that proposed in the law Finance Report for 2017 (Express Photo by Pradip Das)

Highlighting strong arguments against an independent payments regulator, the Reserve Bank of India, in its dissent on the Payment Regulatory Council (PRB) proposed that the governor of the RBI should be its chairman with casting vote. . The RBI disagreed with the composition of the CEP proposed by an interministerial government group, which stated that a "government appointee" should be the president. The RBI also argued that the panel's position is different from that proposed in the 2017 finance law, which stated categorically that the PRB "must include the governor, the RBI as president".

In its August report, the panel formed by the government to finalize the amendments to the Payment and Settlement Systems Act 2007 under the chairmanship of the Secretary of Economic Affairs, SC Garg, had recommended that the PRB is an independent regulatory body, outside the scope of RBI. This contrasts with what was proposed by the Minister of Finance, Arun Jaitley, in the Finance Act, 2017.

"It was recommended that the draft constitution provide for a slightly enlarged composition and provision for a president to be elected. full-time and four full-time members. . In the composition provided by the Finance Law, there were three positions in the RBI and three in the central government. All members were appointed or independent. In this design, there were no full-time members on the PRB. The revised design proposed by this committee aims to fill this gap, "said the committee.

The RBI said Friday that" payment systems are actually technological substitutes for the currency "and that the regulation of such systems can be better done under the RBI.] Stressing that the composition of the PRB did not conform to the announcements made in the finance bill, the RBI said: "The Payment Regulatory Board (PRB) must remain with the Reserve Bank and be governed by the Governor, Reserve Bank of India, which may include 3 members appointed respectively by the Government and the RBI, with a casting vote by the Governor to ensure the proper functioning of the Board. "

The landscape evolution of payment systems in the country – with the introduction of payment banks, prepaid payment instruments or portfolios and proliferation online payments prompted the government and the RBI to review the laws and regulations in place in this area. The volume of transactions on prepaid payment instruments increased to 113.6 million in February 2018 against 59 million in November 2016. The number of transactions made through the unified payment interface also increased to 151.7 million in February 2018, compared to 0.3 million in November 2016. [19659006] While proposing to amend the 2007 law on payment and settlement systems, the 2017 Finance Act proposed that "instead of of the current Payments Regulation and Oversight Council and Regulation, the Payment Regulatory Board will perform the functions related to the regulation and oversight of payment and settlement systems under the Act. "

The finance law, however, proposed the creation of a regulatory body within the general framework of the RBI. The Interdepartmental Committee, on the contrary, emphasized the need for an independent payments regulator, separate from the RBI, to respond to the need to evolve the regulatory design to follow the emerging scenario.

The group in its report noted the point raised by RBI about various jurisdictions where the Central Bank is the regulatory authority for payment systems. "The Committee does not disagree with that. However, jurisdictions such as the United Kingdom and Australia demonstrate that there are several regulators with competing jurisdictions over payment systems, "the report says. "The fact that in some jurisdictions there are different regulators and supervisors of central banks is evidence that the regulation and supervision of the payment system is not a natural corollary of the currency management system of any country. a central bank, "adds the report.

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